Addressing shortages

created by Reza Maghdounieh | 04/19/2018 Knowledge

The market for electronic components is partly defined by extremely high demand in the major Asian markets since 2017 – combined with some heavy increases in purchase prices. It’s not uncommon to see prices in Asia reaching values above those in Europe or North America. The strong demand is causing a tense supply situation throughout the rest of the world, forcing not only customers but also distributors to act quickly and decisively. A number of manufacturers of passive components have invoked allocations. Although most semiconductor manufacturers are still reluctant to take this step and have officially declared increased delivery times of 12 to 16 weeks at best, the reality is already dramatically different. Orders placed ahead of time have their shipping dates confirmed weeks and sometimes months later than requested, which has resulted in panic in the affected purchasing divisions.

That being said, this shortage of components came as no surprise – in fact, the signs of a shortage became apparent back in the third quarter of 2016 when the first manufacturers of passive components mentioned a rising book-to-bill ratio and capacity utilization in the relevant fabs were starting to scrape the 100% mark. This rise not only affects complex, high-technology components – it is also a problem that concerns almost all product segments and technologies. Natural disasters such as the earthquake in Japan and other environmental incidents experienced by a number of manufacturers have further intensified the situation. Remember the catastrophic flood in Thailand in 2014, where hard disk production was disrupted for weeks? This is why these recent procurement problems have compelled specialist divisions to commit themselves to ensuring greater security of supply rather than obtaining any possible discount during price negotiations. A sense of proportion is required at this time – can the supplier with the best price really deliver as quickly as my production planning requires the goods? These are questions that should be carefully considered among others before rash decisions are made.

Those who chose to invest in stable and long-term partnerships with their own suppliers and resisted the urge to squeeze every possible cent of discount that they could out of them will have an enviable competitive advantage in today’s challenging market environment. Long-term partnerships strengthen trust on both sides and make it easier for suppliers to build up more generous stocks of goods, while customers who switch their supply channels every year force suppliers to minimize risk in how they manage their procurement and stock. After all, who wants to sit on stock when a customer keeps switching suppliers?

When shortages are the order of the day, this tends to encourage suppliers whose goods are from dubious sources to crawl out from their holes. It’s not uncommon for customers to be faced with painted wooden fakes with perfectly forged markings. Payment in advance and no entitlement to a warranty are commonplace here. By the time the scam is unearthed, the supplier has usually disappeared off the face of the earth and is no longer reachable, only resurfacing later with a new address, a new website and a new email address to happily resume their business.

This is precisely why, in times of supply shortage, you should only ever rely on official and certified supply channels. This is the only way that customers can be sure that they are only being provided with original goods for their most sophisticated of applications. Should a technical issue arise unexpectedly nonetheless, the authorized distributors and relevant manufacturers will be happy to provide their technical know-how and expertise. Rutronik's customers can depend on the company to always source of its products directly from the contracted manufacturers only, providing them with the greatest protection possible from forgeries. They also benefit from the expertise of the specialists in the event of any queries.

As a broadline distributor with an almost complete portfolio, Rutronik was aware of the risk of a shortage early on. While a number of suppliers spoke about a normal market environment, Rutronik adapted its stocking strategy for all product segments and built up additional inventory wherever possible to account for the manufacturers’ increased shipping times – our customers throughout the world benefit from this today. But even if you are not a Rutronik customer today, you can still benefit from our precautions – at www.rutronik24.com there are always more than a million products from leading manufacturers available in stock from all segments. Take a look at our e-commerce platform – you’ll be surprised, and it’s really worth it.

This is an updated version of the specialist article by Reza Maghdounieh for "Electronics Sourcing", September 2017